From The Metro:
Conservative leader David Cameron today pledged to help working families get through the economic downturn and said he would help by freezing council tax for two years... "One of the first things we would do is freeze the council tax, because after your mortgage that is one of the big bills that you have to pay, and we have identified savings in the Government - the stuff they spend on advertising and consultants - and use that money to freeze your council tax for two years to try and help at this time."
*Sigh*
Council Tax is not 'a bill', it is 'a tax' which raises about £20 billion a year, or £1,000 per household. The taxes on incomes and production (income tax, National Insurance, VAT and corporation tax), that are ultimately borne by 'households' raise about £340 billion a year, an average of £20,000 or so per working age household.
So, tell me Dave, which number is bigger - £1,000 or £20,000?
And as any fule kno, taxes on incomes and production are the ones that stifle an economy, and are the ones that should be reduced first. Contrast that with taxes raised to cover about a quarter of local expenditure (notwithstanding that councils waste shed-loads of money, different topic) - these do not particularly stifle the economy - if anything, they encourage people to work that little bit harder to raise the money to pay the Council Tax.
Finally, what about tenants? The people at the bottom of the pile*? All things being equal, if Council Tax goes up, this depresses the amount of rent that landlords can charge, so a Council Tax freeze does not particularly benefit them.
*/sigh*
* I'll exclude the sell-to-renters from this group, as that would be special pleading.
Friday, 19 December 2008
Dave don't got no clue (8)
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12 comments:
But isn't it a tax on disposable income?
That does the harm surely?
BQ, Council Tax is not a tax on income, it is a modest contribution towards the cost of local services. It does not stifle the economy in the same way as taxes on incomes and production.
Sure, right wingers would like to replace Council Tax with a Poll Tax; and followers of Adam Smith & Milton Friedman would prefer Land Value Tax, (Council Tax is a mixture of both) but this is just changes of emphasis.
"Council Tax is not 'a bill', it is 'a tax' which raises about £20 billion a year, or £1,000 per household."
I wish my CT was £1000 pa.
OK then, "£1,000 on average, once you net off Council Tax Benefit and exemptions". Ours is £2,400, but we're tenants. If the tax were lower, then the landlady would just put up our rent, so what do I care?
Sigh...
Can we say that Dave will be any better than GtM?
CT is experienced as a bill, as it a tax that is levied on income after payroll taxes have been paid. For each £1 of CT I pay I need to earn about £1.30. Unlike VAT (the other "after income tax" tax) it is not linked to specific consumpion choices, and is heavily re-distributive. The best thing anyone could do for hard-working CT payers would be to make CT tax-deductable against income (as local taxes are against federal tax in the USA). It would also eliminate the owner/renter issue.
Charlie B, Council Tax is not heavily redistributive, neither relative to income nor to property values. It is about two-thirds Poll Tax and one third Jealousy-Surcharge.
If you made it tax-deductible, then they would just increase the Council Tax bills or the income tax rate to keep total revenues constant. And there'd be a massive outcry because higher rate taxpayers would get more relief than e.g. pensioners.
I am all in favour of flat rate income tax, but that would still be redistributive (there's no harm in that).
I am also in favour of flat rate taxes on residential property values (like Business Rates on commerical properties), under which people in ex-council flats in Rotherham would pay £100 a year and people in penthouses overlooking St James Park in London would pay £10,000 a year.*
Or would you prefer a pure Poll Tax?
* But I'd also get rid of other Jealousy surcharges like Inheritance Tax or Stamp Duty Land Tax, this is not a 'bash-the-rich' exercise.
Redistributive, in the usual sense of wealth and income might be OK -- it depends why, and how effective and efficient. If a tax is going to redistribute, that should be part of the design (not be an incidental outcome). I think it would not be bad for people to be able to vote for or against such a tax policy.
I too am in favour of a flat tax on property, if a property tax is part of a tax regime for the provision of government services. But the level of that tax, the services, and policies for government responsibilities, should be part of a system of electoral accountability -- which is simply not even remotely the case with British local government now. (Payment for monopoly provision of private services capable of being regulated -- eg rubbish collection -- is another matter).
However, the CT rediustribution I was thinking of was towards those with larger numbers of children (whatever their wealth and income), from those with fewer or none (ditto). And towards those who want to use government-supplied services, rather than provide for themselves (eg half of the library services these days, much of the so-called arts, sports and leisure "services"). My Council uses money to encourage more people to use the latter services, thereby - possibly! - creating more demand which would need more revenue.
I don't think the argument that revenue would be replaced anyway if CT was tax-deductible is strong. Deductibility would not affect the amount of CT raised by local authorities, so they would not need to increase it, or have any justification for doing so. It would affect national government revenues, but generally, and not with reference to local services and councils (unless we had national tax hypothecation) - and any general change in tax levels to make up for the loss would become part of the overall political issue of taxation levels and uses. I don't agree that there would be a "huge" issue about the impact on higher versus lower rate tax payers, certainly not by comparison with the benefits of changing the relationship between local and national tax.
Completely agree about jealousy taxes. CT has a large element of this.
CB ...if a property tax is part of a tax regime for the provision of government services.
Exactly. A lot of the stuff that councils take upon themselves does not add value. How do we measure this? By looking at property or location values.
If councils raise money by force to spend on 'services' that are of dubious benefit, then property and location values in that area go down and tax revenues dry up.
This (as well as democratic accountability in general) would nudge councils towards focussing on their core functions (police, refuse collection, street lighting etc).
I think a citizens dividend will also focus citizens into removing non-core functions from government to increase the CD.
AC1, but there is a trade-off:
1. Increase CBI
2. Reduce taxes on incomes and production (the economically obvious choice, however politically unpopular)
3. Reduce LVT (the politically obvious choice, however flawed).
4. Swapping any of the above for more pork.
Reducing Tax paperwork might help as well.
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